ASX Set for Slow Start Following Wall Street Declines

The Australian share market is expected to begin the day slowly on Wednesday morning following a downturn on Wall Street overnight. Despite some positive updates about the economy and employment in the United States, US stocks faced declines.

As of 8:30am, ASX 200 futures were down by 0.1 percent, indicating a drop of approximately 10 points to 8259. This decline comes after the local market finished up by 0.3 percent on Tuesday, marking four straight days of gains.

Wall Street Performance

In the previous trading session, the S&P 500 fell by 1.1 percent after initially rising. The Dow Jones Industrial Average lost 178 points, or 0.4 percent, while the Nasdaq composite dropped significantly by 1.9 percent.

The decrease in stock prices was influenced by rising bond yields, which surged following the release of two positive economic reports. One report indicated that the number of job openings in the United States was higher than economists had anticipated at the end of November. The other report showed that the growth in the finance, retail, and various service sectors had accelerated much more than expected in December.

While these reports are encouraging for job seekers and those concerned about a possible recession, a robust economy may exert ongoing pressure on inflation. This scenario could lead to the Federal Reserve being less inclined to reduce interest rates, a move that Wall Street generally welcomes.

Economic and Market Implications

Expectations that interest rates might not be cut as much in 2025 have been building, contributing to an increase in long-term Treasury yields. Concerns over potential policy changes under Trump, such as tax cuts, could also add to the national debt and create further upward pressure on yields.

Higher Treasury yields can diminish the appeal of stocks, especially those perceived as overvalued. This shift in investor interest can particularly affect major technology companies, like Nvidia, which recently captivated the market with announcements of new products driven by advancements in artificial intelligence.

After the positive economic reports, Nvidia’s stock, initially on the rise, ultimately fell by 6.2 percent. This decline made Nvidia the largest contributor to the losses seen in the S&P 500, followed closely by declines in other tech giants such as Amazon, Tesla, Apple, and Microsoft.

International Impacts

Additionally, shares of some significant Chinese companies dropped after the US Defense Department placed dozens on a watch list due to alleged ties to China’s military. This included well-known firms such as gaming and technology company Tencent and the artificial intelligence firm SenseTime. Tencent’s stock trading on the Hong Kong market slid by 7.3 percent, contributing to a 1.2 percent decline in the Hang Seng Index. Despite this, many other Asian and European markets displayed stronger performances.

ASX, WallStreet, Stocks